1. A warm RCEPtion
On Thursday, news broke that the Regional Comprehensive Economic Partnership (RCEP) would be signed on Sunday after eight years of laborious negotiation.
Some context: The RCEP is a humongous multilateral trade pact consisting of the following 15 Asia-Pacific countries:
- The 10 member states of the Association of Southeast Asian Nations (ASEAN)
- South Korea
- New Zealand
The agreement is set to drastically slash tariffs between member states and contains key provisions on trade, ecommerce and intellectual property.
Why it’s a big deal: Once it’s officially signed into existence, RCEP will be the world’s largest free trade agreement, covering roughly 30% of global GDP and nearly 30% of the world’s population.
Here’s Vice Foreign Minister Luo Zhaohui (21st Century Biz):
- “[RCEP] fully demonstrates the willingness of regional countries to support multilateralism and free trade and further deepen economic…ties.”
Get smart: The inking of RCEP is a big victory for China. The deal will allow Beijing to play an influential role in shaping regional trade norms and promises to open up new markets for Chinese exports.
Our question: Will bolstered trade ties help to soothe China’s troubled relations with its Southeast Asian neighbors?
2. Hit the road, Jack
When doing business in China, here’s a good rule of thumb:
- Try not to personally annoy Xi Jinping.
Case in point: On Thursday, the Wall Street Journal scooped that Xi Jinping himself was behind the decision to shut down Ant Group’s IPO.
ICYMI: Last week, regulators halted Ant Group’s planned double IPO which was set to be the biggest of all time (see November 3 Tip Sheet).
- Officially the cancellation was about a batch of new fintech regulations, but Ant Group co-founder Jack Ma’s recent public rant about overregulation probably didn’t help.
Seems Xi thought Ma was getting a bit too big for his britches (WSJ):
- “Xi…and other senior leaders were furious, according to the officials familiar with the decision-making.”
- “Xi ordered…regulators to investigate and all but shut down Ant’s initial public offering.”
Ma’s comments couldn’t have been more poorly timed:
- “Xi…has displayed a diminishing tolerance for big private businesses that have amassed capital and influence—and are perceived to have challenged…the stability craved by…the country’s newly assertive Communist Party.”
Get smart: Party leaders want to ensure that private business serves the interests of the state. A tech billionaire mouthing off about regulatory policy was bound to run into trouble.
Get smarter: Xi’s direct intervention may have put Ma in his place, but will spook foreign investors and harm perceptions of China’s business environment.
3. Xi says Party responsible for Shanghai’s achievement
Xi Jinping is on the road again.
On Thursday, Xi was in Shanghai to mark the 30th anniversary of the development of the city’s Pudong district.
Some context: 30 years ago, Pudong was largely undeveloped farmland. Now it’s home to the city’s financial district and the regional headquarters of over 300 multinational companies.
Xi said Pudong’s development demonstrates the wisdom of the Party (CPC People):
- “The remarkable achievements of Pudong in the past 30 years of development and opening up provide the most vivid evidence for the advantages of the socialist system with Chinese characteristics.”
Xi then marked the occasion with some tried and true boilerplate (China Daily):
- “[Xi] called for speeding up the creation of world-class industrial clusters in sectors including integrated circuits, bio-medicine and artificial intelligence.”
- “Xi urged Pudong to establish an international financial-asset trading platform, develop a higher-level headquarters economy, and build itself into an important hub of global industrial, supply and value chains.”
Our take: We don’t see much new in Xi’s speech. Rather it is further confirmation that the Party will stay the course on economic policy.
Up next: On Friday Xi moved on to neighboring Jiangsu province. We should get more details of his trip over the weekend.
4. Global peacemaker Xi
On Thursday, Xi Jinping didn’t only bestow his wisdom on Shanghai (see previous entry).
He also shared some with the Paris Peace Forum, to which he spoke via video link.
Xi called for global unity in fighting the pandemic (Xinhua):
- “We should…give full play to the key leadership role of the World Health Organization, and promote international joint prevention and control.”
He urged joint efforts to promote economic recovery:
- “We will unswervingly…expand opening up, work with the international community to maintain stability of global industrial and supply chains, and build an open world economy.”
And underlined that the recovery must be green:
- He reiterated a carbon neutrality pledge from his September address to the UN General Assembly (see October 14 Tip Sheet).
- He also called to deepen cooperation on climate, environment, and biodiversity.
Finally, he called for the maintenance of – you guessed it – global peace:
- “All countries should strengthen unity instead of creating barriers, promote cooperation instead of inciting conflicts, and join hands to build a community of shared future for all mankind.”
Get smart: China and Europe are largely aligned on these goals. But there’s little appetite in European capitals for cooperation with China these days.
5. Han Zheng says China open for business
On Wednesday, the annual China Development Forum (CDF) kicked off in Beijing.
Some context: The CDF is a venue for high-level officials to woo and rub elbows with foreign companies and investors.
- It’s usually held in the spring, but was delayed due to the pandemic.
This year’s inspired theme: Economic recovery and international cooperation in a post-pandemic era.
Executive Vice Premier Han Zheng addressed the forum’s opening ceremony.
Han promised that the much-hyped dual circulation strategy (DCS) does not spell the end of China’s opening (CGTN):
- “We propose to build a new development pattern, not to engage in a closed domestic cycle, but to promote a more open domestic and international dual cycle.”
- “We will continue to implement wider, broader and deeper opening up.”
Some context: DCS is Beijing’s game plan to make the economy more resilient to external shocks.
Han also gave a shoutout to businesses and investors (Gov.cn):
- “Enterprises from all countries are welcome to actively explore the Chinese market and share in its opportunities.”
- “We welcome investors from all over the world.”
Get smart: Han is not alone in trying to assure foreign businesses. Ever since the DCS was announced in May, officials from Xi Jinping on down have been falling over themselves to insist that the strategy does not mean China will close off its economy.
6. China heightens guard against imported virus
On Thursday, the State Council Information Office gathered officials from different ministries for a press conference on COVID-19 prevention during winter.
National Health Commission Deputy Director Li Bin said to brace for local outbreaks:
- As the pandemic has accelerated its spread globally, the risk of China importing undetected carriers has gone up, said Li.
- Therefore, we will likely see sporadic COVID-19 cases or pocket cluster infections in China throughout the winter.
Li’s caution is not unwarranted.
- Since the beginning of October, the average daily number of imported cases has gone up by 45%, compared to September.
- Between November 1-10, there were a total of 260 imported cases.
To minimize the risk, stricter travel rules have been put into effect over the past days and weeks, by:
- Requiring both antibody and nucleic acid tests from overseas travelers before boarding planes bound for China
- Shortening the effective period of nucleic acid tests
- Halting visa issuance in some high-risk countries (see November 6 Tip Sheet)
Get smart: Officials are well aware that keeping China infection free is key to continued economic recovery and social stability.
What to watch: Will authorities take more drastic measures to restrict international movement given the heightened risks in winter?